ELK-DESA Resources Berhad - Used Car Money lender

Company :  ELK-DESA RESOUCES BERHAD

Business

Non bank lender in used motor vehicles sector. Also involve in selling insurance and wholesale of furniture but revenue contribution is very small (9% only). The business target at very niche market segment.  

 

 Money lending is always having good profit margin. Both CAGR revenue and PAT are growing.

 

10 years revenue:

There is a growing trend of revenue and profit after tax but 2022 FY will be challenging due to MCO. The NPL will be high and I doubt they can repeat 2021 FY business.

 

Peer comparison:

Lates result:

Latest Q1 result has improved compared on YoY basis due to lower impairment allowance. However, it has dropped when compared to immediate preceding quarter as a result of MCO. See below note from Q1 report. As business only open back in late August/September hence coming Q2 result is not favourable.

Cash flow:

Cash flow from operation is lower as hire-purchase receivable is lower when compared YoY

 Prospect:

• Recovery play. Business temporarily affected by MCO but will recover soon.
• Potential growth of furniture segment although still small.

Risk

• Non-performing loan shot up to 4.9% in 2021 annual report as their customer are mainly from B40 and M40 group.

 

Dividen:

Average dividen payout ratio is 60% as per their annual report and pay twice a year.

 

Technical Analysis:

 

Price pre-COVID is RM1.70 and now is trending sideway at RM1.33. Will it rise up to pre-COVID level again?

 

In short, another conservative Ah Pek company and no goreng but we never know when Ah Pek will spring surprises. At time of writing, I don’t have Ah Pek share yet.